May 06, 2019 Practice Points

Supreme Court Strikes Down Class-Wide Arbitration

SCOTUS rules that it this form of arbitration is only available when clearly set forth in a contract.

By David Y. Loh

On April 24, 2018, the U.S. Supreme Court issued an important decision in Lamps Plus v. Varela concerning the availability of proceeding on a classwide basis in arbitration. To put this decision into context, a review of Stolt-Nielsen S.V. v. AnimalFeeds Int’l. Corp.,” 559 U.S. 662 (2010), is in order.

This judgment arises from a petition filed by Shanghai Lan Cai Asset Management Co, Ltd. (SLC) for confirmation of an arbitration award issued by the Beijing Arbitration Commission.

In issuing the judgment, the presiding judge did not provide a well-reasoned decision to explain his reasoning. In fact, the judge simply adopted the proposed final judgment prepared by SLC’s counsel. As a result, we do not gain any insight into the court’s thinking as to why it issued the judgment.

Having said that, this decision is interesting because it effectively confirms a Chinese arbitration award. In the United States, we tend to question the impartiality of the Chinese legal system, and it is unusual to see Chinese arbitration awards or civil judgments being confirmed or enforced in the United States. By comparison, the undersigned is unaware of any U.S. arbitration award or civil judgment being enforced in a Chinese proceeding. Perhaps Chinese judges will, in the future, be more willing to consider enforcing a U.S. award or judgment.

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David Y. Loh is a member with Cozen O'Connor in New York City, New York.

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